PUJAN KIRTLAL SHAH,SURAT vs. ITO, WARD-2(2)(3), SURAT

Grounds of appeal

Succinct facts are that assessee before us is an individual and has field his return of income for assessment year 2010-11 on 27.09.2010, declaring total income of Rs.80,470/-. The case was re-opened after recording the reasons. A notice u/s 148 was issued to the assessee on 22.03.2017 which was duly served upon assessee 23.03.2017. In response to the above, the assessee has stated that return of income originally filed may be treated as return of income filed in response to above notice. Thereafter, notice under section 143(2) of the I.T. Act was issued on 15.09.2017. Subsequently, a notice under section 142(1) of the Income Tax Act alongwith questionnaire was issued to the assessee on 01.11.2017. In response to these notices, assessee attended the office of assessing officer from time to time filed the details called for. During the year under consideration, the assessee is engaged in the business of cheque discounting on commission basis. The case is re-opened on the basis of enquiry report received from the DDIT (Inv.)-III, Surat that the assessee was engaged in the business of cheque discounting/passing. The assessing officer issued show cause notice to the assessee to explain the transaction.

In response to the notice issued by the Assessing Officer, the assessee submitted the details regarding various bank accounts as follows:

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has restricted the commission @ 0.10% instead of 0.25% observing as follows: “[3] During the assessment u/s.143(3) r.w.s. 148, the Ld.AO has accepted the business/modus operandi of the assessee, but only disagreed with quantum of income shown, and in lieu of income shown by assessee, the Ld. AO estimated it at 0.25% on total deposits. From the above it is clear that the Investigation Wing, the Ld. AO & the assessee are in agreement regarding the business of the assessee. No question is raised by Investigation Wing or Ld. AO regarding the source of credits/deposits appearing in bank accounts of the assessee. The only doubt & dispute is regarding the quantum commission earned from this business. As already discussed the assessee has shown 0.08% & 0.06%, whereas the Ld. AO has estimated at 0.25%. 8.3 To justify his case, the AR furnished assessment order, and orders of ld. CIT(A) & Hon'ble ITAT is other cases engaged in cheque discounting business. Few of the orders and income estimated/accepted are as under: Authority Case name % ITAT, Ahmedabad Sanjay R. Shah – 0.10% 88 Taxman.Com 809 CIT(A) Dipak Vithal Das Suchak 0.05% CAS-2/983/2017-18- dated 15-03/2018 ITO, Ward-1(3)(6) Bhavnaben Shah – A.Y.2011-12 – dated 14-12- 0.10% 2018 ITO, Ward-1(3)(4) Dipak V Suchak A.Y.2009-10 – dated 25-11- 0.05% 2016 In addition to above the AR furnished more assessment orders where in the estimation is made at 0.05%. There appears to be a consensus among the ld. AOs that commission income in this business is reasonably at 0.05% of total deposits in bank. The Ld. CIT(A) also has followed the same. However, the Hon'ble Jurisdictional ITAT, Ahmedabad has estimated it at 0.10% which overrides the estimation of the AOs & Ld.CIT(A). In view of the same the commission income is estimated at 0.10% in the two A.Yrs. of instant assesse. The same work out to addition of Rs.38,225/- in AY.2009-10 and Rs.1,84,818/- in A.Y.2010-11. The grounds are decided partly in favour of the assessee.”

We have gone through the above conclusion reached by ld CIT(A). We note that ld CIT(A), by following the decision of Jurisdictional ITAT, Ahmedabad has estimated commission income @ 0.10% instead of commission income estimated by assessing officer @ 0.25%, hence, we do not find any infirmity in ITA.403/SRT/2019/AY.2010-11 Pujan Kiritlal Shah the order of ld CIT(A), therefore, we confirm and approve the findings of ld CIT(A) and dismiss the appeal of the assessee.

Before parting, we would like to state that assessee has also challenged the validity of reopening of assessment under section 147 of the Act. We have gone through the reasons recorded by the assessing officer and observed that reasons were recorded by the assessing officer as per the provisions of section 147 of the Act. We note that credible information was received by the AO from the Investigation Wing, DDIT(Inv.)-III, Surat, and we note that there existed new information with the AO from the credible sources, and also he had applied his mind. The Hon`ble Gujarat High Court in the recent judgment has held that reopening on the basis of the information of the Investigation Wing is valid. In the case of Peass Industrial Engineers Pvt. Ltd 73 taxmannn.com 185(2016) (Gujarat) it was held whether at the instance of same material of another wing, whether reopening is permissible or not. While dealing with said issue this Court has examined the said aspect and has come to the conclusion that reopening is permissible. Therefore, we dismiss the ground No.1 and 3 raised by the assessee.

In the result, appeal of the assessee is dismissed.